Monday, August 30, 2010

Unconstitutional Tax Increase

You may recall two updates which I wrote shortly after the conclusion of this year’s legislative session. I explained my opposition to fee and tax increases and talked about how the increases would hurt Oklahoma’s economy by punishing and disincentivizing Oklahoma small business owners.

One of the more egregious increases was the 300% increase on vending machine operators. This new law will have a devastating impact on Oklahoma’s vending machine operators, at least one of whom lives in House District 31. He has since informed me that he has already pulled his first machine out of service and may very well go out of business.

Small business owners are not the only ones affected. Legislators have been informed by Coca-Cola that the change will also impact their business. They may be forced to pull marginally producing machines and lay off employees as a result.

This reduction in the number of machines will reduce the revenue which the fee generates to the state. Ironically, legislators will be in part thwarted in the effort to generate revenue because there will probably be fewer machines to tax. And, as a result of this short-sighted policy, any number of Oklahomans may become unemployed.

Probably the most egregious increase of the year was a 1% tax increase on private health insurance premiums. This was an item which appeared to have been negotiated for by legislative Democrats and agreed to by Republican leaders. It is inconceivable to me that Republicans would agree to this plan in an era when private health insurance is subject to coming under attack as never before.

It was also clearly an unconstitutional action, because legislators do not have the ability to enact a tax increase without either a vote of the people or a 75% vote of the Legislature.

This was why it was an extremely important occurrence when a number of Republican legislators refused to support the increase and voted against it. In doing so, we denied the proponents of the tax increase the 75% majority they needed to meet constitutional requirements.

The failure of the legislation to receive 75% of the vote did not stop the Legislature from attempting to bypass the State Constitution and implement this tax.

Fortunately, State Insurance Commissioner Kim Holland who was charged with being the custodian of some of the funds generated by the tax refused to participate and sought a statement from the State Supreme Court to declare the tax unconstitutional.

The Court honored Holland’s request and as a result the tax increase has been stopped.

This is not the first time that the court has very properly declared legislative action unconstitutional. I feel it is extremely difficult for the Oklahoma Legislature to expect the people of Oklahoma and other government entities to respect the Constitution and state laws when the Legislature itself ignores the Constitution.

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